CNY/USD Fundamental Outlook at 1500 GMT (EST + 0500)

By IBT Staff Reporter On 03/22/10 AT 11:47 AM

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.40 level and was capped around the ¥90.75 level. Japanese financial markets were closed overnight and will reopen tonight. Dealers cited lingering repatriation flows back into Japan ahead of the fiscal year end next week. It was reported overnight that Bank of Japan's Japanese government bond holdings now total ¥51.6 trillion, a fresh two-year high. National Strategy Minister Sengoku last week reported Japan has extremely little room for additional fiscal stimulus. In contrast, Financial Services Minister Kamei last week reported the government should compile a stimulus package. Bank of Japan last week expanded monetary policy further, doubling a three-month lending facility to ¥20 trillion. Data to be released in Japan overnight include February merchandise trade and February convenience and supermarket store sales. The Nikkei 225 stock index climbed 0.75% on Friday to close at ¥10,824.72. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥122.15 level and was capped around the ¥122.60 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥135.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.05 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8267 in the over-the-counter market, up from CNY 6.8266. Traders are starting to focus on a U.S. government report due 15 April that could potentially identify China as a currency manipulator. Chinese-U.S. relations remain quite embittered at the moment with China suggesting most of the U.S.'s economic and financial problems are of its own making. U.S. Ambassador to China Huntsman verbally intervened last week, saying the U.S. hopes to see more flexibility on the exchange rate. I would be misleading you if I left you with the impression that this wasn't a very, very important issue in the United States, and will continue to be. We'll see how the next few weeks play out. The central bank is expected to tighten monetary policy further imminently. February industrial profits data will be released this week.